Ridley keen on acquisitions as it delivers loss

Ridley Corporation
managing director
Tim Hart
said he will pursue more takeover opportunities as acquisition costs and impairment charges pulled the stock feed and rendering business to a full-year statutory loss of $21.7 million.

Mr Hart, who has only been the top job for six weeks, admitted the result was messy. "It was what it was. We’re focusing on the underlying result which is the second-best result we’ve had," he said.

After selling its Cheetham Salt business for $150 million last year, Ridley is now focused on Agriproducts, and is looking to build scale in rendering and upgrade its mills.

“We’ve got 18 mills and two rendering plants. We’re looking at all those assets and a few of the old ones we're reviewing at the moment," Mr Hart said. “We already picked up two of the bigger players in the [rendering] market but there’s lots of smaller players and there will be opportunities."

Ridley forked out $77 million for BPL Rendering last year and snapped up Camilleri Stockfeeds for an undisclosed fee in 2011. “The industry is still quite fragmented, suggesting more acquisition opportunities," Wilson HTM analyst James Ferrier said.

Ridley itself has been tipped by analysts as the next listed agribusiness to be taken out, with the likes of
GrainCorp
having made a tilt in 2008.

Speculation mounted when US private equity group AGR partners emerged with a 19.7 per cent stake in May. AGR’s managing member
Ejnar Knudsen
has since taken a seat on the board, but AGR’s website says it is a long-term passive investor. “They [AGR] believe in ag as a long-term investment. You couldn’t hope for a better shareholder," Mr Hart said.

The company said that continued price pressure in the diary industry, ongoing reductions in the use of compound feed by dairy farmers, and over-supply and fierce competition in the packaged products sector had hit the bottom line.

“We’re an agricultural processing businesses and we are exposed to agriculture and that has positives and negatives. Some of our returns will be cyclical," Mr Hart said.

The company said piecemeal land sales are likely to offset costs as it pursues the redevelopment of the Dry Creek salt field for residential property.

Dry Creek – which used to supply raw materials to Penrice Soda before the contract was terminated in June – is a potential game changer if its underlying value can be unlocked, but the timeframe and the true value of the asset are hard to determine.

Ridley will receive $500,000 in cash for the next 10 years from Penrice as compensation and has a 10-year option over 4.5 million tonnes of zero cost and fill at Penrice’s Agaston mine in South Australia.

Ridley also said it will continue to construct new mills after commissioning its first new mill since 1997 at Pakenham last year.

Mr Hart would not disclose costs or how much capital was being allocated to mill upgrades, but it is thought each new mill costs about $15 million.